The government intervention effectiveness in promoting remanufacturing: Subsidy or remanufacturing target?

Rapid resource consumption and rising environmental pollution have caught worldwide attention. Recycling and remanufacturing are widely recognized as one of the effective ways to address the above issues. However, due to the lack of government regulation, the recycling and remanufacturing industry has not developed well. Therefore, our study investigates the impact of two key government policies: recycling subsidy and remanufacturing rate target. We assess their effectiveness within a supply chain consisting of a manufacturer, a retailer, and a third-party recycler. The study examines the optimal strategy for each member in five separate scenarios, discussing how these differing policies can promote remanufacturing and influence business decisions. The results show that although a financial subsidy can increase the recycling rate, this intervention might negatively impact social welfare and the environment. Surprisingly, the impact of a remanufacturing target tends to be more beneficial than subsidy strategy, even though this may result in some loss for the manufacturer’s profit. It is also noted that a combined strategy, which includes a remanufacturing target that exceeds a certain threshold, is particularly effective. Overall, this study provides a clearer understanding of how government subsidy and remanufacturing target play their part in promoting remanufacturing.